The Internal Revenue Service (IRS) announced on October 26, 2020 that for the tax year 2021 the annual 401(k) plan contribution limit will be the same as 2020 at $19,500. This includes 403(b), most 457 plans and the federal government’s Thrift Savings Plan.
The catch-up contribution limit for employees aged 50 and over in these plans remains unchanged at $6,500 for 2021.
For highly compensated employees, the threshold for determination remains unchanged at $130,000 in 2021.
The IRS announced this and other changes in Notice 2020-79. This notice provides guidance for cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for the tax year of 2021. Section 415(d) requires the Secretary of the Treasury to annually adjust these limits for cost-of-living increases.
Any employees impacted may want to review their current and future deductions and make any adjustments if needed.